Actually, We Shouldn't Soak the Poor

Last week Bill O’Reilly dutifully repeated one of the right wing’s favorite sentiments about how 51 percent of Americans don’t pay federal income taxes: He said we should soak the poor.

“Why?” he fumed, “Because of social justice, because the feds are allowing Americans who don’t make much money to pay no income tax … ‘Talking Points’ believes it’s time to go back to a Democrat who actually had the right idea about America.”

At which point O’Reilly showed the 1961 clip of JFK’s memorable “ask not what your country can do for you” address.

O’Reilly made a great point. Unfortunately, he’s such a dim bulb that he didn’t have a clue about what he actually said. Back in 1961, the U.S. Tax Code was far more progressive than it is now. And things back then seemed to go rather swimmingly. Back in 1960, as Kennedy prepared to take office, the overall federal tax burden for the upper 1 percent of earners was 71.4 percent. Now it’s less than half of that. And the O’Reillys of this world want the rate for the rich to just keep decreasing. Just the way it never was.

Unlike O’Reilly, Emmanuel Saez is a guy who actually knows what he’s talking about on taxes. He’s an “economist’s economist” who has been awarded the John Bates Clark Medal by the American Economic Association. In 2006 he co-authored a paper titled “How Progressive Is The U.S. Federal Tax System? A Historical And International Perspective,” concluding that:

“The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s.”

The easy-to-digest tables at the end of the paper make it quite plain that the O’Reilly/GOP/Romney mentality that the poor don’t pay taxes is utter hogwash. Though many pay no federal income tax now, the middle class and the poor still pay plenty. As the paper notes:

“The combined employee/employer payroll tax rate on labor income has increased from 6 percent in the early 1960s to over 15 percent in the 1990s and 2000s. Moreover, the Social Security payroll tax applies only up to a cap — equal to $90,000 of annual earnings in 2005 — and is therefore a relatively smaller tax burden as incomes rise above the cap.”

In other words, middle class and lower earners pay a significantly higher percentage of their total income than rich guys do in excise taxes on gasoline, cigarettes, and alcohol and more percentage-wise in user fees, license fees, Social Security, Medicare, and so on. As ABC News wrote:

“To actually pay zero taxes, someone would have to be unemployed, not own any property, live in Delaware, Montana, New Hampshire or Oregon, where there is no sales tax, and not buy anything that has an excise tax, such as alcohol, cigarettes, or gasoline.”

Essentially, if you want to avoid all taxes, you would have to live much the way the Unabomber once did: in the woods, off the grid, eating a lot of squirrels.

The mere fact that this is indisputably so doesn’t stop the far right from pushing the highly regressive “We Should to Soak the Poor” mentality. Just last week, Republican Senate Leader Mitch McConnell whined to CBS’s Charlie Rose that 70 percent of federal revenue is now provided by just the top 10 percent of earners and that “we have an extraordinarily progressive tax code already.”

That almost makes you feel sorry for rich. Until of course you realize that, as Nobel Prize winning economist Joseph Stiglitz points out:

“The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent.”

Or if you prefer your facts from the other side of the great divide, Ron Paul has noted that the top 10 percent of U.S. citizens own 70.9 percent of all U.S. assets.

To make this even more nauseating, it comes on the heels of GOP attempts to blame the great economic meltdown on the poor. To hear the GOP tell it, the whole financial collapse was all the fault of those out-of-power-for-a-decade Democrats and those greedy working stiffs who had the unmitigated gall to want to live in houses.

In the wake of the great collapse, the poor are even poorer, and the rich are even richer. So it seems to me it could not have been the poor who made off with all those trillions back then. And it’s certainly not the rich who need our sympathy now.

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Manda

Always enjoy your perspective. Thanks for the great piece, as usual.

agingcynic

You have done the impossible. I actually feel sympathy for Comcast.

Barry Nolan

I can certainly understand that. Both of you think that it is wrong for others to say demonstrably true things out loud that doesn’t fit your chosen narrative. Good luck with all that annoying reality.

Barry Nolan

Marlene Ross

Barry….thanks for setting the record straight for those who continue to believe that there are those who pay no taxes, whatsoever. I’d like to call your attention to the way the then Gov. Romney gained revenue for our State of Massachusetts during the the time he serve: by hiking fees, but not calling it ‘tax’… the added fees that cost and affected everyone’s pocketbook. Call it what you want, the money went to the State and we ‘all’ pitched in. Thanks, again…great article.

Ed with three kids

please provide graphs of taxation so i can fight this mantra simply by showing them the numbers. thanks. ed

Barry Nolan

Dear Ed,
Here is a link to a handy chart that shows the top marginal tax rates going all the way back to 1913 – when the Income tax was first begun.

A quick looks shows that there have only been five years since World War One – when top marginal taxes rates were lower than they are now – those were during the Reagan/Bush years – and the deficit grew so large so quickly – George ‘Read My Lips” Bush had to raise them back up to a rate higher than it is today.

For the chart that shows has the progressively of the tax rates has decreased dramatically over the years – to to this link –

Scroll down to page 13 – and there is Table 2 – Federal Tax Rates by Income Group from 1960 to 2004.

When I worked at the Joint Economic Committee – I used to keep useful charts like this taped on the wall over my desk. It did cause me to yell at people on C-Span and point to my charts from time to time – which can make you look a little crazy – but overall I found it very helpful.

Regards,
Barry Nolan

Howard

You say O’Reilly said to “soak the poor”. I listened to him via your link and didn’t hear him say that so right off the rest of what you say is suspect. This kind of behavior doesn’t forward the conversations we need to have to solve problems. What is true? Over half of Americans (<$28k/year) don't pay federal income tax and the super rich pay way less (13%) than the middle class (30%). The problem isn't Bill O'Reilly. The problem is that our politicians won't reform the tax code.

Barry

Dear Howard,
You are wrong. Look at everything Mr. O’Reilly notes as being “wrong” and contributing to America “loosing power.” The number of Americans on Social Security Disability, the number on food stamps, the costs of Medicare, the costs of Medicaid, and he complains about the number of middle class and poor Americans that pay no Federal Income taxes. He does not say a single word about the “carried interest” loophole that profits Mr. Romney in such a grotesque way, or the subsidies for crop insurance for millionaire farmers in the current Agriculture bill – or the tax loopholes that permit extractive industries to keep all the profit from the natural resources we all own collectively.

In talking about how the number of people on retirement disability has grown – Mr. O’Reilly is simply too stupid or too dishonest to note that since 1992, the US population has grown by 56 million people – the retirement age has increased – and that the wave of baby boomer retirements is now upon us- right at a time of high unemployment due the Republican recession.

In talking about doing “ones bit for ones country” Mr. O’Reilly is too dumb or dishonest to mention that when JFK made those remarks in Jan of 1961 – the top marginal tax rate was 91% – and that JFK lowered the rate in 1964 – to 77%. Mr. O’Reilly has whined in the past that if his tax rate goes up any more – he might just quit – because it just isn’t worth it. The current top marginal tax rate is 35% – less than half of what JFK lowered it to back in 1964. But – Mr. O’Reilly clearly implies that the solution to our problems is not to let the Bush tax cuts expire – which played a big role in driving the deficit – but to raise the rates on the middle class and the poor – But even though top marginal rates are the lowest in 70 years and income and wealth inequalities have grown to 1930’s proportions – we should certainly not raise the rates on him – even as he asks others “what can you do for your country.”

And the problem is indeed made worse and harder to solve by the likes of Mr. O’Reilly – whose indifference to the truth – and contempt for a large portion of the population – and whose willingness to repeat to his large audience the GOP talking points without examining the truth of them – deserves every decent persons contempt.